BBRY: Z10 Awareness Problem, Says Detwiler; Jefferies Defends

By Tiernan Ray

Detwiler Fenton & Co.’s Jeff Johnston today writes that his “checks” of pre-orders for BlackBerry‘s (BBRY) Z10 handset in the U.S. “indicate that consumer pre-orders have been light and well below expectations.”

The Z10 went on sale for pre-order in the U.S. via AT&T (T) a week ago Monday, March 12th, and at Verizon Communications (VZ) March 14th. The device becomes broadly available at retail at AT&T tomorrow, the 22nd, and will be live at Verizon on the 28th. BlackBerry said last week that it received an order of 1 million units of devices based on its BB10 software, from a single larger partner, which could include the Z10, although that was not specified.

Johnston, however, sees the Z10 as a good offering that users come to like once they’ve tried it out, and opines that the company has an awareness problem getting its product in front of people:

While we acknowledge that disappointing pre-order volumes do not necessarily mean device sales will ultimately fall short of expectations, we think the light volumes underscore the Z10′s awareness issues and the overall competitive environment BBRY faces. BBRY has done a nice job with the OS however they need to figure out how to overcome the lack of mindshare their products have both with consumers and the carrier sales channel. It seems that after users overcome the unintuitive nature of the UI (swiping in particular) and get more comfortable with the OS, they enjoy using it. For example, Indirect Retail regional managers at one major carrier were required to attend a 3 hour training session with BBRY and use the device for 60 days. Most managers went into this kicking and screaming however after having completed the training session, they left feeling good about using the Z10 as their primary device. While this is encouraging at some level, we note that it took a 3-hour training session from a corporate trainer to get savvy wireless managers onboard […] We’re skeptical BBRY will be able to overcome the mindshare and awareness issues they face given the momentum Apple (AAPL) and the [Google (GOOG)] Android camp currently enjoy. Bullish BB10 estimates in the 25MM unit range for FY:14 seems too high in our opinion and we believe a number in the 13MM-15MM unit range is more likely. Comparing BBRY to Microsoft (MSFT) is not an apple-to-apples comparison, however we note that MSFT spent over $250MM for the Windows Phone 8 launch in Q4:12 and they lost share. Windows Phone 8 is a competitive OS and consumers enjoy using it after they discover it but Windows Phone 8 devices could not rise above the noise. BBRY will need to spend aggressively to create awareness and demand which could be a slippery slope as cash burn could become a major issue if sales don’t follow.

Update: Jefferies & Co.’s Peter Misek today opined that the forecast offered last night by Jabil Circuit (JBL) for its fiscal Q3 outlook, while perhaps disappointing to Jabil investors, was nevertheless an encouraging sign for BlackBerry:

BBRY was 10% of FY12 (Aug) revenues for Jabil (we estimate BBRY is about half of JBL’s High Velocity segment). Feb Q High Velocity revenues were -15% Y/Y (guidance -13%), but the May Q is guided +13% Y/Y (+24% Q/Q). We believe Jabil’s production for BBRY is focused on the Q10, which is launching later in the May Q.

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There are 35 comments

MARCH 21, 2013 2:08 P.M.

Anonymous wrote:

3 hours of training?! And 60 days of usage? Know why they came out happier? Because the fricking ordeal was over. It works that way. By the way. How many years will it take them to iron that out? Sheesh. What's the point. Just what the consumer wants to know. A headache. No wonder they don't know how to push the thing fast.

MARCH 21, 2013 2:18 P.M.

Anonymous wrote:

Does it come with a book? How many pages? LOL.

Simple question. If the device is ringing. Can a stranger merely pick up the Z10 and answer it? Or do they have to yell out, help! LOL.

Sure. This thing is going to sell aggressively. Like people want to unlearn iOS and Android. Have you ever been to Britain and driven a car on the wrong side of the road? Lot of fun.

MARCH 21, 2013 2:21 P.M.

Anonymous is Dumb wrote:

If it took them 3 hours to learn how to use the Z10 then they shouldn't be allowed to use a phone without parental supervision. Literally took me 15 minutes to figure out the basics. Then again, since every other smartphone is exactly the same "open app, close app, open app" it may take some of the slower people longer to unlearn the archaic/inefficient tendencies of IOS and Android phones.

Windows phone? Never seen one in person
Iphone? Was cool until my mom got one
Android Phones? I like security so no thanks.

MARCH 21, 2013 2:23 P.M.

Anonymous wrote:

I heard they were in such a hurry to get the device out that they forgot the home button. But that will be available in one of the future upgrades.

MARCH 21, 2013 2:25 P.M.

Anonymous wrote:

Was there any mention of having to carry extra batteries...

MARCH 21, 2013 2:29 P.M.

Superfly_FR wrote:

This is the (approximatively translated) statement of Frank Boulben CMO of BlackBerry in a French (Business) TV Show interview :

"US is our biggest market. 4K enterprise are already testing BES10. Preorders at ATT and Vierzon are very encouraging, on the same trend than in Canada. All lights are green. Main products reviewers (as NYT) made very positive reviews."

I was in London last week and thre were poeple with the BB10. it looked good.

but what surprised me was how many iphones there were. I thought there were a lot in NYC, but it was much more popular in London.

MARCH 21, 2013 2:38 P.M.

Henry 3 Dogg wrote:

If there are awareness issues they are within RIM management.

They seem unaware that a phone that would have struggles to compete with the iPhone 4, 32 months ago, isn't going to sell now.

They seem unaware that users do not want co commit to an ecosystem that probably won't be around in 18 months.

They seem unaware that after multiple extended service outages, people no longer trust their security.

The seem unaware that people no longer trust them to deliver,

Yes. There is a deep awareness problem.

MARCH 21, 2013 2:41 P.M.

Kurt wrote:

It takes about 10 minutes to understand the basics of the Z10. The joy of this new OS is the user interface...after a few hours of use you will learn to love how fluid and slick the OS is compared to the buggy Androids and boring iOS. Who is Detwiller anyway...isn't that the name of the paper company from the TV show The Office?

MARCH 21, 2013 2:42 P.M.

Remember the PlayBook?! Initial estimates were 12 million would sell the first year: Ha! wrote:

12 million! What happened? They pulled in possibly 2 million sales in a year and at a huge loss.

By the way. Did they ever fix the PlayBook? How many apps does it have? The non ported Android apps?

MARCH 21, 2013 2:44 P.M.

TD wrote:

Yeah, it's totally an awareness problem.

MARCH 21, 2013 2:50 P.M.

ArZa wrote:

Must be a huge awareness problem, especially in light of:

- AT&T pushing out the delivery of pre-orders due to overwhelming demand
- Best Buy selling out online of their pre-orders

MARCH 21, 2013 2:54 P.M.

Anonymous wrote:

Yea people have issues with learning new things in our country because they are lazy. That is why so many people fail at things in life. BB will be ok. I am with At&t but did not pre order due to changing over to t-mobile nex. Can't wait for my new phone. My torch has been broken for months.So all good here.

MARCH 21, 2013 2:57 P.M.

Anonymous wrote:

After the Z10 and the Q10 they're going to release 4 more models the first year. Hmm. Bets are. They will cancel models. Like after the 7" PlayBook we were supposed to see a 10" BB tablet. An LTE midel too. Yeah. Well we're still waiting. Eh. Or is that fodder for more empty Blackberry promises?! Nevertheless. The stick will temporarily shoot up on any BS. At least we know the round bacon is true. Or did they kick that?

MARCH 21, 2013 3:04 P.M.

@ Anonymous is Dumb wrote:

Your mom has an iPhone? Then how did she manage to raise such a dumb kid?! Or do you take after your old man?

MARCH 21, 2013 3:06 P.M.

BTW wrote:

Today's Report: Apple remains No. 1 in Customer Support!

How's Blackberry going to deal with that? More lies and promises?!

MARCH 21, 2013 3:11 P.M.

freddysrevng wrote:

ENTER BB10----

Hello?! Hello? Where is everyone?

MARCH 21, 2013 3:14 P.M.

My Advice wrote:

Before buying. Wait. Wait till they're giving them away for free. That's ultimately been their modus operandi. No fail.

MARCH 21, 2013 3:22 P.M.

ZombieSalsaDancer wrote:

I think I will stick with my BB5. It has a physical kb.

MARCH 21, 2013 3:37 P.M.

Anonymous wrote:

wow. i didnt even know detwiler is still in business. and never was a tech market force. sorry.

BlackBerry has now issued a statement confirming that its relationship is still on with the Department of Defense — for its sake hopefully closing the loop on the story that started with reports that the DoD would be dumping its deal with the troubled Canadian handset maker, once a mainstay of business users, who are now migrating to Apple and Android devices. BlackBerry says that its devices and services are in the so-called Security Requirement Guide approval state right now, as are others, and BlackBerry will be the first to come out of it.

BlackBerry says that it’s getting approval for BB10 devices, the PlayBook and the on-device enterprise services that it runs on these, with that expected to come in early April.

From a BlackBerry spokesperson:

Our work with the U.S. Department of Defense is going well and the U.S. Department of Defense is moving forward with testing of BlackBerry Enterprise Service 10 and the new BlackBerry Z10 smartphone. We are currently working with the Defense Information Systems Agency (DISA) and anticipate Security Technical Implementation Guides (STIG) and Security Requirement Guide (SRG) approval for the BlackBerry Device Service, BlackBerry 10 and BlackBerry PlayBook by early April. BlackBerry was the first to go through the new SRG process by the Defense Department and will be the first to successfully come out of it.

BlackBerry is in a critical position right now where each example of a key enterprise customer dumping the company’s devices is like another thorn in its side, or a straw on its back. The report that its position at the organization was getting replaced by some 650,000 Apple devices would have been a catalysing example of how far it had fallen from its incumbent position as the king of enterprise mobility.

Some believe that while BlackBerry are still making the list for approved devices, when it comes to user choice, many are opting for other devices like Android handsets and iPhones — an opportunity that companies like Samsung and Apple are now trying to seize.

The DoD had already denied the original report, but what BlackBerry is doing is spelling out that not only will the order include its new range of BB10 handsets but also its ailing tablets as well as its Device Service, putting on a brave face to fight the next battle of the smartphone war.

MARCH 21, 2013 4:44 P.M.

Douken wrote:

What they need is more advertisement. I watch TV and I haven't seen a single Blackberry commercial. Just the one in the superbowl. People don't even know a new Blackberry is coming.

MARCH 21, 2013 5:27 P.M.

eldonw wrote:

I'm probably a little jaded from all, (which there are many) of the out and out false and poorly researched articles. But this seems like another "to little to late" articles. Somewhat toned down but along the same lines. Is this just another article of the sky is falling sell all your Bbry stock and save yourself as well as the poor 147 million stocks that have been shorted?

MARCH 21, 2013 6:02 P.M.

al wrote:

Got the Bold 9900 clunker at work, asked our phone admin about Z10 and the answer was it would be a huge pain to migrate the data.

MARCH 21, 2013 7:57 P.M.

Markus wrote:

Having used all 3 platforms (windows doesn't count) I can honestly say that the BB10 is the easiest to use and getting rid of those buttons makes for a much smoother interface. In seems every day hundreds of new apps come on board - even the gamers and kids can get everything they want. The keyboard is hands down the best- everyone will try to catch up by coping it. Recent media stories claiming security is an issue turn out to be made up (i wonder if they are shorting Blackberry ). They do need to get it in peoples hands - after that the skies the limit.

MARCH 21, 2013 8:38 P.M.

Anonymous is clueless wrote:

@Anonymous. There is a learning curve of approximately 1 day to get the hang of the phone. People in other countries managed fine and they love the phone. I can see however how Americans like you might not be able to figure it out.

MARCH 21, 2013 8:44 P.M.

Bob wrote:

@Douken....I see the lack of advertising as a good sign. Production capacity is not infinite but is going full tilt. What would be the point of advertising when demand is strong enough that every phone produced is sold. I can see a probable shortage of phones over the next few months. Advertising would be a waste of money.

MARCH 21, 2013 9:00 P.M.

PI wrote:

Do analcysts get paid to write this drivel?

It's obvious this analysts is one of many who made the brain dead decision to Short Blackberry last fall and is doing their best to cover their losses, not only were they idiots ofr Shorting BBRY they went long APPL at $700, god help anyone putting their life saving under their management.

MARCH 21, 2013 9:01 P.M.

DumbAmericans wrote:

3 hours of training? That's becuase Americans are dumb and have hard time learning anything other than iCrap.

MARCH 21, 2013 9:16 P.M.

Jason wrote:

Understand BBRY's positioning as a high end smartphone with a brand new unique OS that is meant for intelligent business consumers. Sick of hearing complaints about it, the QNX technology is the fastest on the market and the future of gestures is where mobile user interface is headed. There's no need for a home button which is why the new phones don't have it.

Stop being an ignorant consumer until you try it for yourself, once you get past the learning curve, it's super easy to use. If you're not a fan, wait until the second generation phones surface and the App Store evolves with apps like Instagram. Blackberry the brand may be old, but the new tech and new products offer a refreshing taste on the future of mobile smartphone computing.

GIVE IT SOME TIME.

Apples iOS is 6 years old.

The future is BBRY vs. Android.

MARCH 21, 2013 9:28 P.M.

bored iphone user wrote:

I agree with someone who earlier mentioned that this articled seems manipulative, designed to make bbry look bad. How does an analyst access pre order information? Are there any officials from the companies this guy accessed going on record? No. Hmmmm, sounds fishy to me. Its an analyst. Less trustworthy than a used car salesman in my opinion. They say what their masters ask them to say to manipulate stocks.

I am bored with my iphone and I like the Z10. I cannot be alone. There may be a sea change this year in the handset business, peeps.

MARCH 22, 2013 12:20 A.M.

2014-2015 SHORT SHORTY SHORT SHORT. Hmm wrote:

Yep. How bad will it be? Just imagine a toaster has been plugged in. Then the toaster has been tossed into your sudsy bath water!

Good luck with your new operating system. The rest of Blackberry's portfolio is all pepped up for the attrition it faces.

Signed,
Mister Bubbles.

MARCH 22, 2013 12:11 P.M.

al wrote:

Hopefully Z10 will sell hundreds of units in the US grand opening

MARCH 22, 2013 12:51 P.M.

John wrote:

Johnston speaks of which he knows nothing, a typicle american tendancy. I bought a playbook for 129 last fall and began consistantly staring blankly at my iphone as i tried to swipe the screen and it failed to respond.
As soon as the BB10 came available i bought it and fell head over heels for it. I have never had a blackberry before this and i am not a techy guy but i know a good thing when i see it. It is the MOST intuitive device i have ever used.

About Tech Trader Daily

Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.